Sugarcane ethanol: Contributions to climate change - BAFF

The global impacts of US and EU biofuels policies
consumers, and a huge switch to �ex-fuel vehicle manufacture and sale to grow this market.
Without strong government intervention, it will not happen.
What options exist? �e most popular among the ethanol industry is switching to E15 or
E20 instead of E10. �e major problem is that automobile manufacturers believe the existing
�eet is not suitable for anything over E10. Switching to a higher blend would void warranties
on the existing �eet and potentially pose problems for older vehicles not under warranty.
In the US, the automobile �eet turns over in about 14 years, so it is a long term process. We
could not add yet another pump for E15 or E20. �e costs would be huge. So the blending
wall in the near term is an e�ective barrier to growth of the ethanol industry. If a switch is
made to an E15 or E20 limit for standard cars, some agreement would have to be reached
on who pays for any vehicle repair or performance issues.
On the technical side, two options could emerge. One would be using cellulose through a
thermochemical conversion process to produce gasoline or diesel fuel directly. Today this
process is quite expensive, but the cost might be reduced over the next few years. A second
option is to convert cellulose to butanol instead of ethanol, which is much more similar to
gasoline. Without such a breakthrough, the EPA administrator likely will be forced to cap
the RFS far below the planned levels.
Until we hit the blending wall, most of the imports likely would increase total consumption
and not displace maize ethanol. However, we will probably reach the blending wall in
2009/10, at which point imports would likely displace domestic maize ethanol and thereby
lower maize price.
3. Impacts of US and EU policies on the rest of the world
Our analysis of global impacts is done using the Global Trade Analysis Project (GTAP)
model and data base. �is work is based on Hertel et al. (2008). We begin with an analysis
of the origins of the recent bio-fuel boom, using the historical period from 2001-2006 for
purposes of model calibration and validation. �is was a period of rapidly rising oil prices,
increased subsidies in the EU, and, in the US, there was a ban on the major competitor to
ethanol for gasoline additives (MTBE) (Tyner, 2008). Our analysis of this historical period
permits us to evaluate the relative contribution of each of these factors to the global biofuel
boom. We also use this historical simulation to establish a 2006 benchmark biofuel economy
from which we conduct our analysis of future mandates.
We then can do a forward-looking analysis of EU and US biofuel programs. �e US Energy
Policy and Security Act of 2007 calls for 15 billion gallons of ethanol use by 2015, most of
which is expected to come from maize. In the EU, the target is 5.75% of renewable fuel use
in 2010 and 10% by 2020. However, there are signi�cant doubts as to whether these goals are
attainable. For this analysis, we adopt the conservative mandate of 6.25% by 2015 in the EU.
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